Questions from Financial Management

Q: Suppose interest rates on residential mortgages of equal risk are 5.

Suppose interest rates on residential mortgages of equal risk are 5.5% in California and 7.0% in New York. Could this differential persist? What forces might tend to equalize rates? Would differential...

Q: The Scampini Supplies Company recently purchased a new delivery truck. The

The Scampini Supplies Company recently purchased a new delivery truck. The new truck costs $22,500; and it is expected to generate after-tax cash flows, including depreciation, of $6,250 per year. The...

Q: Suppose you held a diversified portfolio consisting of a $7,

Suppose you held a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio’s beta is 1.12. Now suppose you decided to sell one of the stocks in you...

Q: What is the implied nominal interest rate on a Treasury bond ($

What is the implied nominal interest rate on a Treasury bond ($100,000) futures contract that settled at 100’16.0 (or 100-160)? If interest rates increased by 1%, what would be the contract’s new valu...

Q: A bond has a $1,000 par value, 10

A bond has a $1,000 par value, 10 years to maturity, and a 7% annual coupon and sells for $985. a. What is its yield to maturity (YTM)? b. Assume that the yield to maturity remains constant for the ne...

Q: a. What effect would each of the following events likely have

a. What effect would each of the following events likely have on the level of nominal interest rates? (1) Households dramatically increase their savings rate. (2) Corporations increase their demand fo...

Q: Ballack Co.’s common stock currently sells for $46.

Ballack Co.’s common stock currently sells for $46.75 per share. The growth rate is a constant 12%, and the company has an expected dividend yield of 5%. The expected long-run dividend payout ratio is...

Q: Kahn Inc. has a target capital structure of 60% common

Kahn Inc. has a target capital structure of 60% common equity and 40% debt to fund its $10 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 13%, a before-tax cost of debt of 10%, and...

Q: Wingler Communications Corporation (WCC) produces premium stereo headphones that sell

Wingler Communications Corporation (WCC) produces premium stereo headphones that sell for $28.80 per set, and this year’s sales are expected to be 450,000 units. Variable production costs for the expe...

Q: The Bouchard Company’s EPS was $6.50 in 2008,

The Bouchard Company’s EPS was $6.50 in 2008, up from $4.42 in 2003. The company pays out 40% of its earnings as dividends, and its common stock sells for $36.00. a. Calculate the past growth rate in...